Grabbing Profits! Today, Perform a One-Day Repurchase Operation on Government Bonds and Earn 5 Days of Interest?
Image source: Hexun Creative
Before the Dragon Boat Festival, it is often a good time for investors to perform government bond repurchase operations. As the interest accrual period approaches, the optimal date for performing a one-day government bond repurchase operation is June 20th, which is today.
Opportunity to earn profits, please check out this guide to "earning money" during the Dragon Boat Festival, and welcome the mini-holiday. Experts advise that although government bond repurchase operations carry extremely low risks, investors still need to exercise caution based on their own circumstances.
Today, perform a one-day government bond repurchase operation and earn 5 days of interest?
Government bond repurchase is also known as "bond-pledged reverse repurchase". Simply put, government bond repurchase is a tool used by financial institutions to borrow money from ordinary investors.
Since the holders of government bonds are often securities companies, banks, insurance companies, and trust companies, these institutions may use government bonds as collateral when they lack funds, which is essentially a short-term loan. Government bond repurchase operations carry extremely low risks, with the intermediate guarantor being the trading platform, ensuring almost the same level of safety as government bonds.
Why do we say that major holidays often provide good opportunities for investors to perform government bond repurchase operations? Currently, according to transaction regulations, government bond repurchase operations during major holidays are also calculated based on interest accrual periods.
According to the Shanghai and Shenzhen Securities Exchanges' holiday arrangements released in 2023: June 22nd (Thursday) to June 25th (Sunday) will be closed, and June 26th (Monday) will resume trading as usual.
Since government bond repurchase operations generate income = (transaction amount * interest rate * actual occupancy days / 365) - (transaction amount * commission fee rate), the actual accrual period for government bond repurchase is from the initial receipt date (inclusive) to the maturity receipt date (exclusive) of the natural days.
Therefore, before the Dragon Boat Festival, assuming an investor sells a 2-day government bond repurchase on June 19th and earns interest for 6 days, they can earn 4 extra days' worth of interest; or if they sell a 1-day government bond repurchase on June 20th and earns interest for 5 days, they can earn 4 extra days' worth of interest.
Chart showing the calculation of interest accrual period for government bond repurchase operations. Image source: Times Finance
A securities brokerage manager at a certain securities firm told Times Finance that because government bond repurchase operations generate income on the next business day, performing an operation on June 21st would not allow investors to enjoy the interest earned during the holiday. Therefore, investors should pay attention to the timing of their operations.
At the same time, this manager also pointed out that month-end, quarter-end, year-end, and major holidays are times when financial institutions have a strong need for short-term funds, which results in higher yields on government bond repurchase operations. Therefore, before the holiday, performing an operation at a high-interest rate point can increase interest earnings and reach a higher level of returns than usual.
Moreover, government bond repurchase operations with high yields are also a good time to perform operations, not necessarily limited to major holidays. "Government bond repurchase is suitable for idle funds; do it at the high-yield point." Another industry insider told Times Finance.
You can trade on the securities company's APP, and many listed companies are fond of government bond repurchase operations.
Recently, several banks have lowered their deposit interest rates, while securities companies' government bond repurchase yields remain relatively high, with better liquidity. It can serve as an alternative to fixed deposits for investors.
How do investors participate in government bond repurchase operations? In fact, the operation is not complicated; investors only need to find the government bond repurchase interface on their securities company's APP during trading hours and place an order according to their own preferences.
The threshold for participating in government bond repurchase operations is also relatively low, with a minimum investment of 1,000 yuan. According to the latest regulations, the Shanghai Stock Exchange has reduced its reverse repurchase transaction threshold from 100,000 yuan to 1,000 yuan or multiples thereof, with a minimum price fluctuation unit of 0.005.
To trade government bond repurchases on the Shanghai Stock Exchange, investors need to open a shareholder account; for trading on the Shenzhen Stock Exchange, they need to open a shareholder account as well; and the reverse repurchase codes for both exchanges start with "GC-" or "R-", respectively.